PWBA
Office of Regulations and Interpretations

Advisory
Opinion

This is in reply to your request for an advisory opinion regarding the
applicability of Title I of the Employee Retirement Income Security Act of 1974
(ERISA) to a tax-sheltered annuity program established pursuant to section
403(b) of the Internal Revenue Code (the Code). Specifically, you ask whether
Universities Research Association, Inc. (also known and hereinafter referred to
as Fermilab) has established or maintains an employee pension benefit plan
within the meaning of section 3(2) of Title I of ERISA with regard to either
the "retirement annuity contracts" or the "supplemental
retirement annuity contracts" made available to employees of Fermilab
under the annuity program.

You represent that Fermilab makes available to its employees, on a voluntary
basis, annuity contracts issued by the Teachers Insurance & Annuity
Association-College Retirement Equity Fund (TIAA-CREF). You further represent
that the annuity contracts qualify as tax-sheltered annuities under section
403(b) of the Code. Employees of Fermilab are permitted under the annuity
program to make voluntary contributions to the annuity contracts. In addition,
prior to March 1, 1989, Fermilab made contributions to the annuity contracts on
behalf of its employees out of its own assets. However, after February 28,
1989, Fermilab ceased making contributions of its own funds. You state that
Fermilab does not recommend the annuity contracts to its employees, does not
hold the contracts in its name, and does not receive any compensation from
TIAA-CREF; that all rights under the annuity contracts are enforceable solely
by the employees who own the contracts; and that, except as described below,
Fermilab merely remits employee contributions to TIAA-CREF.

You further represent that employees may choose to purchase either
retirement annuity contracts or supplemental retirement annuity contracts from
TIAA-CREF. Only the supplemental retirement annuity contracts permit in-service
withdrawals, and such withdrawals are permitted only on account of disability
or financial hardship. To make an in-service withdrawal, an employee must file
a request, using a TIAA-CREF form entitled "Request for a Supplemental
Retirement Annuities Payment" (the Payment Form). The instructions for the
Payment Form provide that "[i]f your withdrawal is because of disability
or hardship, the Plan Representative of your employer must complete and sign
Section A or B, whichever is applicable." Under Section A, the form
requires the plan representative to certify that the participant "is
eligible for a distribution of 403(b) elective deferral accumulation (including
post-1988 contributions and earnings) because he/she is disabled as defined by
the Internal Revenue Code." Under Section B, the form requires the plan
representative to certify that the participant "is eligible for a
distribution of post-1988 403(b) elective deferral contributions because he/she
has met the definition of financial hardship (as set out in the Internal
Revenue Code and regulations)." You represent that Fermilab verifies
financial hardship "based on factors it deem[s] appropriate given the
employee's circum- tances," but requiring only minimum documentation, such
as a copy of the requestor's mortgage loan application in the case of a
purchase of a residence, to show that the employee is using the distribution in
an appropriate manner. You further state that, since January 1, 1989, only 10
employees of the 549 who own supplemental retirement annuity contracts have
requested hardship distributions.1

The term "employee pension benefit plan" is defined in section
3(2) of Title I of ERISA to include:

any plan, fund, or program which was heretofore or is hereafter
established or maintained by an employer or an employee organization, or by
both, to the extent that by its express terms or as a result of surrounding
circumstances such plan, fund, or program--

(i) provides retirement income to employees, or

(ii) results in a deferral of income by employees for periods extending to
the termination of covered employment or beyond,regardless of the method of
calculating the contributions made to the plan, the method of calculating the
benefits under the plan, or the method of distributing benefits under the plan.

In 29 C.F.R. § 2510.3-2, the Department of Labor (the Department)
clarified the definition of "employee pension benefit plan" by
identifying certain tax-sheltered annuity arrangements that would not
constitute employee pension benefit plans, particularly those arrangements with
respect to which the employer's involvement is so limited that it does not, in
the Department's view, constitute the establishment or maintenance of the
program by the employer. In pertinent part, regulation section 2510.3-2(f)
provides that a program shall not be "established or maintained by an
employer" if:

(3) the sole involvement of the employer, other than pursuant to
paragraph (f)(2) above, is limited to any of the following:

(i) permitting annuity contracts (which term shall include any agent or
broker who offers annuity contracts or who makes available custodial accounts
within the meaning of section 403(b)(7) of the Code) to publicize their
products to employees;

(iii) summarizing or otherwise compiling the information provided with
respect to the proposed funding media or products which are made available, or
the annuity contractors whose services are provided, in order to facilitate
review and analysis by the employees;

(iv) collecting annuity or custodial account considerations as required by
salary reduction agreements or by agreements to forgo salary
increases,remitting such considerations to annuity contractors and maintaining
records of such consideration; [and]

(v) holding in the employer's name one or more group annuity contracts
covering its employees . . . .

In connection with our review of your request, we have identified certain
areas in which the annuity program does not meet the criteria set forth in
regulation section 2510.3-2(f).2

First, you have represented that Fermilab formerly made contributions from
its own assets to the annuity contracts on behalf of employees. By making such
contributions, Fermilab exceeded, at that time, the limited involvement
permitted to an employer under subparagraph 2510.3-2(f)(3).

In addition, Fermilab's involvement in the process of determining
eligibility for in-service distributions on account of disability or financial
hardships under the supplemental retirement annuity contracts requires employer
involvement in excess of that contemplated by regulation section
2510.3-2(f)(3). In order for Fermilab to certify an individual's disability or
an individual's financial hardship, within the meaning of the Code, Fermilab
must evaluate circumstances and exercise its judgment. Its determinations, in
effect, control the grant or denial of an important benefit under the program,
the right to in-service withdrawals. It is our view that Fermilab, in
exercising this control, exceeds the limited involvement contemplated by the
regulation. We would view differently an annuity program that was structured to
require an employer merely either to certify to the annuity issuer a state of
facts within the employer's knowledge as employer, such as an employee's
attendance record or compensation level, or to transmit to the annuity issuer
another party's certification as to other facts, such as a doctor's
certification of the employee's physical condition. An employer's agreement to
perform such ministerial duties under an annuity program would not, in our
view, constitute involvement in excess of that contemplated by section
2510.3-2(f).

Accordingly, in the case at hand, we are unable to conclude that the
supplemental retirement annuity contracts offered to employees of Fermilab are
not "established or maintained" by Fermilab within the meaning of
section 3(2) of Title I of ERISA.

You request that, in the event the Department declines to opine that the
annuity contracts are not established or maintained by Fermilab within the
meaning of section 2510.3-2(f), the Department toll the grace period for
non-filers, which was originally to expire September 30, 1992, and was further
extended to December 31, 1992, for Fermilab during the period this opinion was
under consideration. The Department has determined generally not to further
extend the grace period and declines to extend the grace period for Fermilab.

This letter constitutes an advisory opinion under
ERISA Procedure 76-1.
Accordingly, it is issued subject to the provisions of that procedure,
including section 10 thereof relating to the effect of advisory opinions.

Sincerely,

ROBERT J. DOYLE
Director of Regulations
and Interpretations

1 You have made no representations regarding the
frequency of requests for disability withdrawals or the nature of the process
employed in evaluating such requests.

2 In accordance with the Department's prior
practice, we will not opine on whether the particular funding media or products
offered to employees under the annuity program constitute a "reasonable
choice" within the meaning of regulation subparagraph 2510.3-2(f)(3)(vii).